MASTERMIND, INC. - Quarter Report: 2020 March (Form 10-Q)

mmnd20200331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File Number: 000-26533

MASTERMIND, INC.

(Exact name of registrant as specified in its charter)

Nevada		82-3807447
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1450 W. Peachtree St. NW, Atlanta, Georgia		30309
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number: (678) 420-4000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class		Trading symbol(s)		Name of exchange on which registered
Common Stock, $0.001 par value		MMND		OTCQB

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 25, 2020, there were 33,870,520 shares of the registrant’s Common Stock outstanding.

Mastermind, Inc.

Table of Contents

Form 10-Q

		Page
Part I	Financial Information

Item 1	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets at March 31, 2020 and September 30, 2019	3
	Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019	4
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	6
	Notes to Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4	Controls and Procedures	15

Part II	Other Information

Item 1	Legal Proceedings	16
Item 1A	Risk Factors	16
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3	Defaults Upon Senior Securities	16
Item 4	Mine Safety Disclosures	16
Item 5	Other Information	16
Item 6	Exhibits	16

Signatures		17

Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements (unaudited)

Mastermind, Inc.

Consolidated Balance Sheets

(Unaudited)

	March 31, 2020		September 30, 2019

ASSETS
Current assets:
Cash and cash equivalents	$	782,276	$	742,173
Accounts receivable		387,123		414,650
Unbilled receivables		123,378		51,976
Prepaid expenses and other current assets		256,369		186,087
Total current assets		1,549,146		1,394,886
Property and equipment, net		69,656		78,940
Right-of-use asset, net		413,893		-
Total assets	$	2,032,695	$	1,473,826

LIABILITY AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses		127,330		130,395
Unearned revenues		159,934		169,820
Deferred tax liabiltiies		154,242		139,937
Lease obligation, current		99,725		-
Total current liabiltiies		541,231		440,152
Lease obligation, net of current portion		314,168		-
Total liabilities		855,399		440,152

Stockholders' Equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of March 31, 2020 and September 30, 2019		-		-
Common stock, $0.001 par value, 125,000,000 shares authorized, 33,870,520 shares issued and outstanding as of March 31, 2020 and September 30, 2019		33,871		33,871
Retained earnings		1,143,425		999,803
Total stockholders’ equity		1,177,296		1,033,674
Total liabilities and stockholders’ equity	$	2,032,695	$	1,473,826

The accompanying notes are an integral part of these condensed consolidated financial statements.

Mastermind, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended March 31,				Six Months Ended March 31,
	2020		2019		2020			2019

Revenues	$	947,846	$	1,474,036	$	2,014,133		$	2,695,377
Cost of revenues		369,366		528,655		773,998			999,707
Gross Profit		578,480		945,381		1,240,135			1,695,670

Operating Expenses:
General and administrative		462,492		593,527		1,041,552			1,278,343
Total operating expenses		462,492		593,527		1,041,552			1,278,343
Income from operations		115,988		351,854		198,583			417,327

Other Income (Expense), Net:
Loss on disposal		-		-		(660	)		-
Merger and acquisition expense		-		-		(9,445	)		-
Interest income		199		-		597			-
Total other income (expense), net		199		-		(9,508	)		-
Net income before provision for income taxes		116,187		351,854		189,075			417,327
Provision for income taxes		22,039		107,905		45,453			107,906
Net income	$	94,148	$	243,949	$	143,622		$	309,421

Net income per common share:
Basic	$	0.00	$	0.01	$	0.00		$	0.01
Diluted	$	0.00	$	0.01	$	0.00		$	0.01

Weighted average common shares outstanding:
Basic		33,870,520		33,870,520		33,870,520			33,870,520
Diluted		33,870,520		33,870,520		33,870,520			33,870,520

The accompanying notes are an integral part of these condensed consolidated financial statements.

Mastermind, Inc.

Consolidated Statements of Stockholders' Equity

Three and Six Months Ended March 31, 2020 and 2019

(Unaudited)

	Common Stock
	Shares		Amount		Additional Paid-in Capital		Retained Earnings		Total Equity
Balance at September 30, 2019		33,870,520	$	33,871	$	-	$	999,803	$	1,033,674
Net income								49,474		49,474
Balance at December 31, 2019		33,870,520	$	33,871	$	-	$	1,049,277	$	1,083,148
Net income								94,148		94,148
Balance at March 31, 2020		33,870,520	$	33,871	$	-	$	1,143,425	$	1,177,296

	Common Stock
	Shares		Amount		Additional Paid-in Capital		Retained Earnings		Total Equity
Balance at September 30, 2018		33,870,520	$	33,871	$	-	$	1,753,748	$	1,787,619
Net income								65,472		65,472
Balance at December 31, 2018		33,870,520	$	33,871	$	-	$	1,819,220	$	1,853,091
Net income								243,949		243,949
Balance at March 31, 2019		33,870,520	$	33,871	$	-	$	2,063,169	$	2,097,040

The accompanying notes are an integral part of these condensed consolidated financial statements.

Mastermind, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net income	$	143,622		$	309,421
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation		13,865			14,805
Loss on disposal of equipment		660			-
Changes in assets and liabilities:
Accounts receivable		27,527			(72,092	)
Unbilled receivables		(71,402	)		(283,146	)
Prepaid expenses and other current assets		(70,282	)		(53,912	)
Accounts payable and accrued expenses		(3,065	)		279
Unearned revenues		(9,886	)		(109,363	)
Deferred tax liabilities		14,305			7,913
Net cash flows provided by (used in) operating activities		45,344			(186,095	)

Cash flows from investing activities:
Purchases of property and equipment		(5,241	)		(8,832	)
Net cash flows provided by (used in) investing activities		(5,241	)		(8,832	)

Cash flows from financing activities:
Collection of related party advance		-			6,589
Net cash flows provided by (used in) financing activities		-			6,589
Net change in cash and cash equivalents		40,103			(188,338	)
Cash and cash equivalents at beginning of period		742,173			861,371
Cash and cash equivalents at end of period	$	782,276		$	673,033

Supplemental disclosure of cash flow information:
Income taxes paid	$	-		$	-
Interest paid	$	-		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

Mastermind, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1.	Business

Mastermind, Inc. (the “Company”, “we”, “us”, or the “organization”) is an involvement marketing service agency that designs, creates and develops branding and marketing campaigns, primarily for large corporate clients with well-known brands. We specialize in customer conversion initiatives that we believe facilitate the involvement of more of the “right customers” with the brands of our clients. We focus on converting prospects to customers. Our programs can take on various forms, including creating and managing content marketing, influencer marketing, social marketing/community management, digital issues management promotions, Augmented Reality Marketing, and UX Analytics & Digital Intelligence.

On February 14, 2018, we consummated a transactions pursuant to a Joint Venture Interest Contribution Agreement (the “Contribution Agreement”) made and entered into as of February 14, 2018 by and among (i) us, (ii) Mastermind Involvement Marketing, a Georgia joint venture (“MIM”), and (iii) Mastermind Marketing, Inc, a Georgia Corporation (“MM Inc.”), Digital Advize, LLC, a Georgia limited liability company (“Advize”), and Villanta Corporation, a Georgia Corporation (“Villanta”, together with Advize and MM Inc., the “Sellers” or “Majority Stockholders”).

Pursuant to the Contribution Agreement the Sellers contributed, transferred, assigned and conveyed to us all right, title and interest in and to one hundred percent (100%) of such joint venture interest in MIM (the “Contributed Joint Venture Interest”), together with any and all rights, privileges, benefits, obligations and liabilities appertaining thereto, reserving unto such Seller no rights or interests therein whatsoever, and (ii) we accepted the contribution of the Contributed Joint Venture Interest, and in consideration for such contribution the Sellers collectively were entitled to receive from us 29,236,759 of our common stock, $.001 par value (the “Common Stock”) representing 85% of our total outstanding Common Stock after the issuance of the Contribution Consideration (the “Contribution Consideration”) with each Seller receiving for its respective percentage of Contributed Joint Venture Interest that same percentage of the Contribution Consideration (such transaction, the “Business Combination”). As a result of the Business Combination, the Sellers became our controlling shareholders of and we became a wholly-owned subsidiary. The Business Combination was treated as a “reverse acquisition” for accounting purposes, whereby MIM is considered the acquirer for accounting purposes, and our historical financial statements before the Business Combination will be replaced with the historical financial statements of MIM and its consolidated entities before the Business Combination in all future filings.

On April 19, 2018, our Board of Directors took action by written consent to approve an amendment to our certificate of incorporation (the “Amended Certificate”) to change of our name from CoConnect, Inc. to Mastermind, Inc. (the “Name Change”), subject to stockholder approval. On April 27, 2018, in lieu of a meeting of our stockholders, and pursuant to Section 78.320 of the Nevada Revised Statutes of the State of Nevada, the Majority Stockholders, who represent 85% of our voting securities, approved the Amended Certificate, by written consent. On May 24, 2018, we filed the Certificate of Amendment with the Secretary of State of the State of Nevada to change our name to Mastermind, Inc.

2.	Interim Financial Statements and Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information pursuant to Rule 8-03 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments), which we consider necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three and six months ended March 31, 2020 may not necessarily be indicative of results that may be expected for any succeeding period or for the entire fiscal year. These condensed consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K as of and for the fiscal years ended September 30, 2019 and 2018 as filed with the Securities and Exchange Commission.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments, which are evaluated on an ongoing basis, and that affect the amounts reported in our unaudited condensed financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to revenue recognition, allowance for doubtful accounts, useful lives and valuation of property and equipment.

We adopted the Accounting Standard Codification (“ASC”) 606, “Revenue from Contracts with Customers” as of October 1, 2018, using the modified retrospective method, and concluded that, consistent with prior reporting, our revenues are primarily generated from our involvement marketing services and contracts which are typically billed based on time and materials or at a fixed price. If billed at a fixed price, revenue is recognized on a proportional performance basis as the services specified in the arrangement are performed. The determination of proportional performance revenue recognition is dependent on the nature of the services specified in the arrangement. Advanced payments on services and contracts are deferred and recorded as unearned revenues on our balance sheet until the earnings process has been completed and revenue is then recognized. In all cases, we evaluate involvement marketing contracts to determine that the time and amount of services reflects the consideration expected to be received for the performance obligations that have been provided in accordance with the five-step process to recognize revenues as defined in ASC 606. ASC 606 defines contracts as written, oral and through customary business practice. Under this definition, we consider contracts to be created at the time that an order to provide services is agreed upon regardless of whether or not there is a written contract. Results for reporting periods after January 1, 2018 are presented under ASC 606.

There have been no material changes in the Company’s significant accounting policies, other than the adoption of accounting standards update (“ASU”) 2016-02, Leases (Topic 842) related to the accounting for leases, in the quarter ended December 31, 2019 as described below, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended September 30, 2019.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under prior accounting guidance. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. We adopted ASU 2016-02 in the quarter ending December 31, 2019, utilizing the modified retrospective transition method on October 1, 2019. We have elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date, (3) initial direct costs for any existing leases as of the adoption date and (4) the application of hindsight when determining lease term and assessing impairment of right-of-use assets. The adoption of the new standard on October 1, 2019, resulted in a lease obligation and related right-of-use asset of approximately $461,740. The impact on the statement of operations was not material.

The recently declared pandemic related to the coronavirus could adversely impact our future results, especially if our customers are negatively impacted by the decrease in economic activity caused by the virus. If our customers fail to reach budgeted revenue projections and reduce their expenditures proportionally, we could experience lower than expected growth in revenue or lower overall revenue. We could also experience delays or declines in revenue and new business and or implementations of marketing campaigns if customers or potential customers delay or cancel their plans due to the economic slowdown caused by the virus. Additionally, our operations could be impacted, and we could experience higher costs if, despite our mitigation and prevention efforts, the virus spread prevents affected employees from performing key duties.

3.	Related Party Transactions

On January 3, 2012, we entered into a perpetual license agreement (the “Perpetual License”) with Mastermind Marketing, Inc. (the “Licensor”), which provides for licenses of trademarks, internet domains, and certain intellectual property as defined in the Perpetual License. The Licensor is one of our stockholders and its chief executive officer. The Perpetual License, which may be terminated at any time by either party, is effective January 3, 2012 and provides for aggregate payments of $2,100,000 over the calendar years from 2019 through 2039 with no further payments required after December 31, 2039. During the three months ended March 31, 2020 and 2019, the Company made license payments of $15,000 and $0, respectively. During the six months ended March 31, 2020 and 2019, the Company made license payments of $15,000 and $0, respectively. As of March 31, 2020 and September 30, 2019, there were no license fee payments required or payable.

On January 3, 2014, we entered into a commercial lease agreement (the “Lease”) with 1450 West Peachtree, LLC, a Georgia limited liability company (the “Landlord”), for the lease of our corporate facility in Atlanta, Georgia. The manager of the Landlord is also our chief executive officer. The term of the lease is 10 years from the date of the agreement and provides for monthly rent and payment of operating expenses on a triple-net basis. The monthly rent terms of the lease have been altered by the landlord due to another tenant occupying space the Company verbally agreed to allow the landlord to remove from the space available to the company. In satisfaction of our obligation to the Landlord pursuant to the Lease, we made lease payments of $30,000 and $30,000 during the three months ended March 31, 2020 and 2019, respectively, and we made lease payments of $60,000 and $60,000 during the six months ended March 31, 2020 and 2019.

During the three months ended March 31, 2020 and 2019, we made payments to our Majority Stockholders pursuant to the terms of an operating agreement, as amended, for services rendered to us in the aggregate amount of $160,225 and $212,810, respectively. During the six months ended March 31, 2020 and 2019, we made payments to our Majority Stockholders pursuant to the terms of an operating agreement, as amended, for services rendered to us in the aggregate amount of $410,450 and $425,620, respectively. As of March 31, 2020 and September 30, 2019, we had no obligations payable to our three majority stockholders for consulting services.

4.	Property and Equipment

Property and equipment consist of the following:

	March 31,			September 30,
	2020			2019
Furniture, fixtures and office equipment	$	121,239		$	146,932
Leasehold improvements		73,795			73,795
Property and equipment, gross		195,034			220,727
Less: accumulated depreciation		(125,378	)		(141,787	)
Property and equipment, net	$	69,656		$	78,940

Depreciation expense for the three months ended March 31, 2020 and 2019 was $6,634 and $7,201, respectively. Depreciation expense for the six months ended March 31, 2020 and 2019 was $13,865 and $14,805, respectively.

5.	Income Taxes

We are required to file federal and state income tax returns in the United States. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by us. In consultation with our tax advisors, we base our tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various federal and state taxing authorities in the jurisdictions in which we file tax returns. As part of these reviews, a taxing authority may disagree with respect to the income tax positions taken by us (“uncertain tax positions”) and, therefore, may require us to pay additional taxes. As required under applicable accounting rules, we accrue an amount for our estimate of additional income tax liability, including interest and penalties, which we could incur as a result of the ultimate or effective resolution of the uncertain tax positions. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

There were no unrecognized tax benefits at March 31, 2020 and September 30, 2019. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There were no accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the periods presented. We have determined we have no uncertain tax positions.

6.	Stockholders’ Equity

Preferred Stock

As of March 31, 2020 and September 30, 2019, we were authorized to issue a total 1,000,000 shares of preferred stock. There were no shares of Preferred Stock issued or outstanding as of March 31, 2020 and September 30, 2019.

Common Stock

As of March 31, 2020 and September 30, 2019, we were authorized to issue a total of 125,000,000 shares of common stock, and there were 33,870,520 shares issued and outstanding.

Pursuant to the Contribution Agreement in 2018, we issued 29,236,759 shares of our common stock, in the aggregate, to Mastermind Marketing, Inc, a Georgia Corporation, Digital Advize, LLC, a Georgia limited liability company, and Villanta Corporation, a Georgia Corporation. These three entities are controlled by Daniel A. Dodson, Ricardo Rios, and Michael Gelfond; respectively. Messrs. Dodson, Rios and Gelfond were appointed as our executive officers upon the consummation of the Contribution Agreement.

Common Stock Options

As of March 31, 2020 and September 30, 2019, there were fully-vested, non-qualified stock options exercisable by our former chief executive officer and sole director into 525,667 shares of our common stock at an exercise price of $0.15 per share. There were no stock options exercised or issued during the six months ended March 31, 2020 and March 31, 2019.

A 2018 Equity Incentive Plan consisting of four million (4,000,000) shares of Common Stock was also adopted by written consent of holders of 85% of the voting securities. No options or shares have been issued under this plan as of March 31, 2020 and September 30, 2019.

7.	Concentration of Credit Risk and Major Customers

For the three months ended March 31, 2020, five clients represented approximately 20%, 17%, 15%, 14% and 14%, respectively, of our total revenues. For the three months ended March 31, 2019, one client represented approximately 10% , of our total revenues.

For the six months ended March 31, 2020, four clients represented approximately 14%, 14%, 13% and 10%, respectively, of our total revenues. For the six months ended March 31, 2019, one client represented approximately 10% of our total revenues.

As of March 31, 2020 and September 30, 2019, we had accounts receivable of $253,345, or 67%, due from four customers; and $347,085, or approximately 83%, due from four customers, respectively.

8.	Subsequent Events

In April 2020, we received funds for 2.5 months of payroll costs as provided for under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act. These funds were not included in the balance sheet as of March 31, 2020 since they were not received prior to quarter-end, but they were subsequently recorded as a note payable on the date of receipt. The determination of how these funds will be forgiven is not yet fully known as of the date of issuance.

We evaluated all events or transactions that occurred after the balance sheet date through the date when these financial statements were issued and we determined that, other than events described above, we did not have any material recognizable or disclosable subsequent events.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This quarterly report on Form 10-Q contains certain statements that are “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Litigation Reform Act”). These forward-looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available.

The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended or using other similar expressions.

In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this quarterly report on Form 10-Q. For example, we may encounter competitive, technological, financial and business challenges making it more difficult than expected to continue to develop and market our products; the market may not accept our existing and future products; we may not be able to retain our customers; we may be unable to retain existing key management personnel; and there may be other material adverse changes in our operations or business. Certain important factors affecting the forward-looking statements made herein also include, but are not limited to (i) continued downward pricing pressures in our targeted markets, (ii) the continued acquisition of our customers by certain of our competitors, and (iii) continued periods of net losses, which could require us to find additional sources of financing to fund operations, implement our financial and business strategies, meet anticipated capital expenditures and fund research and development costs. In addition, assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our marketing, capital expenditure or other budgets, which may in turn affect our financial position and results of operations. For all of these reasons, the reader is cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date hereof. We assume no responsibility to update any forward-looking statements as a result of new information, future events, or otherwise except as required by law. For further information, you are encouraged to review our filings with the Securities and Exchange Commission (“SEC”), including our Current Report on Form 8-K, as filed with the SEC on February 22, 2018, as amended on April 20, 2018, and risk factors as discussed therein under Item 2.01.

Overview

Mastermind, Inc. is a digital marketing agency that plans, executes and analyzes digital marketing initiatives for clients in numerous industries including Fashion, Automotive, Spirits & Beer, Business-to-business, Consumer Electronics, Banking & Financial Services, Consumer Packaged Goods, Food & Beverage, Healthcare, Home Improvement, Restaurants, Retail, Technology, and Communications. Mastermind offers a unique approach to digital and social marketing called Involvement Marketing (IM). IM is aimed at involving more people with each clients' brand in ways that inspire them to take an action (e.g.- becoming aware of the brand, trying it, purchasing more of it, and/or even becoming an advocate for the brand through social media). Mastermind's Involvement Marketing initiatives encompass any one, or combination of tactics including Content Marketing, Digital/Mobile Marketing, Influencer Marketing, Social Marketing & Community Management, Promotion Marketing, Digital/Social Issues Management, UX Analytics & Digital Intelligence, and Augmented Reality Marketing.

Mastermind has assembled a team of highly experienced, cross-functional marketing experts to develop and execute Involvement Marketing initiatives (see key executive bios below). These experts have extensive backgrounds in digital/social marketing & media, content development, influencer marketing, promotion, digital contingency communications & PR, research, strategy, creative message development, and analytics. Mastermind has also developed a disciplined approach to Involvement Marketing that ensures the right tactic(s) is employed to best achieve the objective and that it is executed flawlessly. The team is led by our senior executives described in our 10-K as of and for the fiscal year ended September 30, 2019.

Mastermind has worked with some of the widely recognized brands in in dozens of industries. While the agency does not have a client in every industry currently, its experience provides the confidence of potential major clients to consider hiring Mastermind. Mastermind works with clients on both a project-basis and ongoing services basis. Mastermind is developing innovative marketing technology initiatives with the potential to drive more interest from potential clients in the next few years. Our senior executives Daniel Dodson (CEO), Michael Gelfond (President), and Ricardo Rios (SVP) have developed solid reputations and contacts over their careers that will be instrumental in driving new business (see below for bios on these officers).

Mastermind Key Leadership

Daniel Dodson, CEO and founding partner of Mastermind Marketing in 1984. Under his leadership, Mastermind has grown into a nationally-recognized, award-winning integrated digital marketing agency that ranks at the top of both Ad Age's and Chief Marketer's top agencies. Dan is a renowned expert in Involvement Marketing -- leveraging social, mobile, digital and promotion to get more people involved with the right brand benefits at the right time to drive revenue and deliver measurable ROI. He has been published in numerous trade publications and spoken about Involvement Marketing on dozens of occasions.

Dan has a wealth of experience working with leading brands in almost every industry including 7/11, AT&T, Bank of America, Bayer, BMW, Chase, Chick-fil-A, Ciba Vision, Citi, Coors Brewing Company, The Coca-Cola Company, Dreyer's, ESPN, Fruit-of-the-Loom, Georgia Pacific, Hanes, Harley-Davidson, Harman, The Home Depot, Johnson & Johnson, Kodak, Kroger, Macy's, Mazda, MTV, Nabisco, NBC, Nestle, Roche, Saks 5th Avenue, Sears, Sharp Electronics, Shell, UPS, Valvoline, Verizon, and many others.

Prior to Mastermind, Dan was a certified public accountant at HLB Gross Collins, P.C. where he worked on a variety of manufacturing and service businesses.

Michael Gelfond, President, is recognized leader in digital marketing with a deep experience helping clients drive results for clients.

After graduating from the UGA in 1995 Gelfond started his career with iXL, one of the first global digital agencies. After a successful IPO, Mike and other colleagues saw an opportunity to spin-off the Atlanta operations private and launched Creative Digital Group in 2002. After building Creative Digital into one of the Southeast’s fastest-growing interactive agencies, they were acquired by LBi, the world’s premier independent global digital agency, in 2007. After pioneering this successful venture, Gelfond left LBi in the summer of 2010 and joined Mastermind Marketing, the Southeast’s leading social, mobile, digital and promotion agency as EVP and Partner.

During his career Mike has helped guide some of the world’s most well-known brands such as ATT, Bayer, Coca-Cola, ING, Pebble Beach Resorts, Roche, The Home Depot and The NFL Network, to name a few. He is a frequent speaker and contributor to National and Southeast TV, radio and print on all matters digital. In 2010, Mike was a recipient of Atlanta Business Chronicle’s 40 Under 40 award.

Ricardo Rios, Senior VP, has been with Mastermind for 3 years. He is results-driven, versatile traditional and digital marketing executive with a strong business background and 19 years of agency and client-side experience with clients including Citi, Harley-Davidson, PayPal, The Home Depot, Exxon, and others.

Prior to Mastermind, Ricardo was Vice President of Digital Marketing for Citi Retail Services, a division of Citigroup.

During his time at Citi, he successfully built out a digital consultancy function that provided key marketing services to Citi’s retail partners including The Home Depot, Macy’s, Best Buy, Staples and other major retailers. He started his career with an Agency start-up and was recognized as part of the “Top 25 WSI Consultant Earners List” from a network of over 1500 digital marketing consultants worldwide.

Ryan Wofford, VP Strategy, leads strategic planning for Mastermind across a variety of disciplines, including brand strategy and communications, UX, analytics, as well as social and digital strategy. He has been with Mastermind for almost 4 years and is a seasoned strategic marketing leader with two decades of experience, delivering conversions and measurable results for Fortune 500 global companies and small businesses alike. Ryan has developed and executed marketing strategies to help clients achieve business goals and communication objectives through digital execution that increased sales pipelines and conversions, strengthened brand awareness and loyalty, and positioned companies as thought leaders within their industries.

Ryan has lead development of social and key event activation strategies and executions for clients like Bayer Crop Science's corporate and marketing communications groups for the past two years. In addition to the always-on social strategy, key campaigns he has helped lead include Feed A Bee, Thankful 4 Ag, Citrus Matters and more. Ryan also leads social media strategic planning for Bayer’s Animal Health division in the US, which includes their key social campaigns like Share for Shelters, and PAWS – these campaigns help raise awareness of the lack of domestic abuse shelters that can accept survivors of domestic abuse and their pets.

Critical Accounting Policies

Our significant accounting policies are described in Note 2 to the financial statements which are included in our Annual Report on Form 10-K as of and for the fiscal years ended September 30, 2019 and 2018. Our discussion and analysis of our financial condition and results of operations are based upon these financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on an on-going basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In the past, actual results have not been materially different from our estimates. However, results may differ from these estimates under different assumptions or conditions.

Results of Operations

Three Months Ended March 31, 2020 vs. March 31, 2019

Revenues

Revenues for the three months ended March 31, 2020 were $947,846 as compared with $1,474,036 for the comparable prior year period, a decrease of $526,190 or 35.7%. The decrease is attributable to a lower level of actual work accomplished and revenue recognized on projects from various customers during the three months ended March 31, 2020 as compared to the comparable prior year period. These fluctuations in work accomplished for revenue recognition are normal occurrences in our business.

Gross Profit

Gross profit for the three months ended March 31, 2020 was $578,480 or 61.0% of revenues, compared with $945,381 or 64.1% of revenues, for the comparable prior year period. The decrease in gross profit dollars is primarily due to fluctuations in project revenue flow for our business as the gross profit as a percentage of revenues remained relatively consistent.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2020 were $462,492 as compared with $593,527 for the comparable prior year period, a decrease of $131,035 or 22.00%. Our general and administrative expenses decreased primarily as a result of decreased personnel and overhead costs.

Other Income and Expense

Other income and expense for the three months ended March 31, 2020 comprised of minimal interest income. The comparable prior year period did not include any of the other income and expense items.

Six Months Ended March 31, 2020 vs. March 31, 2019

Revenues

Revenues for the six months ended March 31, 2020 were $2,014,133 as compared with $2,695,377 for the comparable prior year period, a decrease of $681,244 or 25.3%. The decrease is attributable to a lower level of actual work accomplished and revenue recognized on projects from various customers during the six months ended March 31, 2020 as compared to the comparable prior year period. These fluctuations in work accomplished for revenue recognition are normal occurrences in our business.

Gross Profit

Gross profit for the six months ended March 31, 2020 was $1,240,135 or 61.6% of revenues, compared with $1,695,670 or 62.9% of revenues, for the comparable prior year period. The decrease in gross profit dollars is primarily due to fluctuations in project revenue flow for our business as the gross profit as a percentage of revenues remained relatively consistent.

General and Administrative Expenses

General and administrative expenses for the six months ended March 31, 2020 were $1,041,552 as compared with $1,278,343 for the comparable prior year period, a decrease of $236,791 or 18.5%. Our general and administrative expenses decreased primarily as a result of decreased personnel and overhead costs.

Other Income and Expense

Other income and expense for the six months ended March 31, 2020 comprised of $9,445 in expenses related to merger and acquisitions or related activities, and minimal losses on disposal of equipment as well as minimal interest income. The comparable prior year period did not include any of the other income and expense items.

Liquidity and Capital Resources

As of March 31, 2020, we had cash of $782,276, a decrease of $40,103 when compared with a balance of $742,173 as of September 30, 2019.

During the six months ended March 31, 2020, we had net cash of $45,344 provided by operating activities as compared with net cash of $186,095 used by operating activities for the comparable prior year period. Our uses of cash for operating activities have primarily consisted of salaries and wages for our employees; costs incurred in connection with performance on client projects; facility and facility-related costs, material and professional fees. The sources of our cash flows from operating activities have consisted primarily of payments received from clients in connection with the performance on contractually agreed-upon projects. Net cash flows from operating activities increased by $231,439, as compared to the comparable prior year period, primarily due to a more favorable changes in unbilled receivables and unearned revenues. These changes were largely a result of timing, and are not necessarily the best indicator of our performance.

During the six months ended March 31, 2020, we had net cash of $5,241 used in investing activities as compared with net cash of $8,832 used in investing activities for the comparable prior year period. The net cash outflows during the six months ended March 31, 2020 and March 31, 2019 were a result of the purchase of computers and office equipment.

During the six months ended March 31, 2020, we had net cash of $0 provided by financing activities as compared to net cash of $6,589 provided by financing activities for the comparable prior year period. The cash provided by financing activities for the six months ended March 31, 2019 occurred due to the repayment of a related party advance. There was no such activity for the six months ended March 31, 2020 and no related party advances requiring repayment as of March 31, 2020.

The ability to attract additional capital investments for more rapid expansion in the future will depend on many factors, including the availability of credit, rate of revenue growth, ability to acquire new client opportunities, the timing of new service product introductions and enhancements to existing services/products, and the opportunities to acquire complimentary businesses that may be made available to us from time-to-time. We believe that as of March 31, 2020 our cash position and cash flows from our fiscal year 2020 operations will be sufficient to fund our working capital and planned strategic activities, excluding acquisitions, if any, for at least the next twelve months.

Any potential future sale of equity or debt securities may result in dilution to our stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, or at all. If we are required to raise additional financing, but are unable to obtain such financing, we may be required to delay, reduce the scope of, or eliminate one or more aspects of our operations or business development activities.

The recently declared pandemic related to the coronavirus could adversely impact our liquidity and capital resources, especially if our customers are negatively impacted by the decrease in economic activity caused by the virus. If our customers fail to reach budgeted revenue projections and reduce their expenditures proportionally, we could experience lower than expected growth in revenue or lower overall revenue. We could also experience delays or declines in revenue and new business and or implementations of marketing campaigns if customers or potential customers delay or cancel their plans due to the economic slowdown caused by the virus. Additionally, our operations could be impacted, and we could experience higher costs if, despite our mitigation and prevention efforts, the virus spread prevents affected employees from performing key duties.

Off-Balance Sheet Arrangements

As of March 31, 2020, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of March 31, 2020 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our management concluded that, as of March 31, 2020, our internal control over financial reporting was not effective due to (i) insufficient segregation of duties in the finance and accounting functions due to limited personnel; and (ii) inadequate corporate governance policies. In the future, subject to working capital limitations, we intend to take appropriate and reasonable steps to make improvements to remediate these deficiencies.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

We are not a party to any legal proceedings, other than ordinary routine litigation incidental to our business, which we believe will not have a material effect on our financial position or results of operations.

Item 1A. Risk Factors

With the exception of risk factors disclosed in Item 8.01 of our Form 8-K as filed with the Securities and Exchange Commission on April 15, 2020, there have not been any material changes from the risk factors previously disclosed under Item 2.01 of our Current Report on Form 8-K as filed with the Securities and Exchange Commission on February 22, 2018, as amended on April 20, 2018.

The risk factor disclosed in Item 8.01 of our Form 8-K as filed with the Securities and Exchange Commission on April 15, 2020 was as follows:

A pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our employees, facilities, or advisors could adversely impact our business and financial reporting process.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are filed or furnished with this report:

Exhibit No.	Description
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Principal Executive, Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation
101.DEF**	XBRL Taxonomy Extension Definitions
101.LAB**	XBRL Taxonomy Extension Label
101.PRE**	XBRL Taxonomy Extension Presentation

* Included herewith

** Filed with this report in accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subjected to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Mastermind, Inc.

Date: June 29, 2020

By:

/s/ Daniel A. Dodson

Daniel A. Dodson

Chief Executive Officer

(Principal Executive, Financial and Accounting Officer)